Cattle on feed up 2 percent in April; good weather holds back placements

Markets
Apr 27, 2012
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According to USDA’s April cattle on feed report, the population of cattle in feedlots of 1,000 head or more stood at 11.5 million on April 1. This inventory was 2 percent higher than April of 2011.

The makeup of the cattle on feed population for April 1 was 7.2 million head of steers (62.5 percent) and 4.3 million head of heifers (37 percent). The remaining half percent was slaughter cows and bulls.

California, Nebraska and Washington saw the largest year-to-year increases in the cattle on feed population. Compared with April 1, 2011, California was up 9 percent, with 490,000 cattle on feed. Nebraska saw a 6 percent increase from last year’s numbers with 2.5 million head of cattle on feed, and Washington saw a 13 percent increase in its feedlot population, at 233,000 head, as of April 1, 2012.

As always, the largest feedlot populations were seen in Texas, Nebraska and Kansas. Texas had 2.8 million-head on feed as of April 1, 2012, this number holding steady with last year’s population. As mentioned, Nebraska’s 2.5 million head feedlot population was 6 percent higher than last year. Kansas had 2.2 million cattle on feed in April, down 1 percent from the previous year.

Andrew Gottschalk and Bob Wilson of Hedgers Edge called the cattle on feed numbers neutral, and expect a continued downward trend to a low in August and September. In general, the number of cattle on feed displayed in USDA’s report was in keeping with analysts’ pre-report estimates.

As a result, few analysts had much commentary on the numbers.

Cattle placed on feed at feedlots with a 1,000 head capacity within the month of March declined 6 percent compared to last year, with a total of 1.8 million head placed. This was a smaller decline than anticipated by analysts’ pre-report estimates, the average of which projected a 7.7 percent decline.

As with the total on-feed population increases, California, Nebraska and Washington saw the greatest year-to-year placement increases. California placed 54,000 head in March, a 10 percent increase from March 2011. Nebraska saw a 13 percent increase, placing 440,000 head in March 2012 compared to the 390,000 head placed in 2011.Washington placements jumped up 12 percent for March 2012 at 37,000 head versus 2011’s 33,000 head.

The heaviest weight category of cattle, 800 pounds (lbs.) or more, saw the largest placements in March, with 602,000 head of this category placed. This is as compared to last month where this category saw 510,000 head placed, and last year where 585,000 cattle in the 800 lbs. and over group were placed.

All told, the weight-specific placements for March 2012 compared to March 2011 were as follows: under 600 lbs., 390,000 vs. 380,000; 600-699 lbs., 300,000 vs. 360,000; 700- 799 lbs., 500,000 vs 589,000; 800 lbs. and over 602,000 vs. 585,000.

“The year over year decline is not that surprising given the large number of cattle placed on feed last March,” reported CME Group. “As the January 1 inventory showed, the supply of feeder cattle outside feedlots this year is smaller than the year before, reducing the stock available for placements.”

“Early movement of cattle into feed yards last summer and fall meant fewer cattle coming off winter pastures this spring, though it was interesting to see an increase over last year in the heaviest weight category,” was the commentary from North American Risk Management Services, Inc. (NARMS).

CME Group also projected a decline in placements in the months to come. “Feedlot placements are expected to be lower from the previous year in the coming months as the industry struggles with margin pressures and tight supplies.

Much will depend on weather and the availability of pasture this summer.”

Bloomberg analysts attributed the reduced placements on the already tight cattle supply and the improving grazing opportunities in many areas, suggesting cattle are being put out to graze rather than being put into feedlots.

According to the Livestock Marketing Information Center, Nebraska’s numbers were the most interesting of the placement results. “…Nebraska placed 50,000 head more than a year ago in that heavy-weight category, while all other states were down significantly.

“Further, Nebraska reported rather large increases in the other disappearance category collected by USDA. In Nebraska, it appears that animals previously reported as on-feed may have been in ‘backgrounding’ or grow-lot situations. If those animals were transferred or sold in March they would be accounted for in both placements and in other disappearance. Without that Nebraska situation, national feedlot placements would have been smaller, but the on-feed inventory [remained] unchanged from what was reported.”

March marketings, at 1.9 million head, were down 4 percent from the previous year but up 9 percent from February. This also bunked the average year-to-year pre-report estimates put out by the CME Group which anticipated a 5.5 percent decline in March marketings. This year’s numbers were down only slightly when one considers last year’s record-setting March numbers and the fact March 2012 had one fewer marketing days than usual. Compared to the five-year average, this year’s 1.9 million head marketed in March is a 2 percent increase.

With one exception, year-to-year increases in marketings were seen in smaller feedlot population states.

California, Idaho and Washington all saw double digit increases in their March 2012 marketings compared to March 2011 at 11, 12 and 29 percent, respectively. Nebraska was the only large-capacity state to see year-to-year marketing increases at 460,000 head marketed, up 7 percent from last year.

Colorado, Kansas and Texas saw marketings decrease in March 2012 as compared to the prior year. Colorado marketed 175,000 head, down 8 percent from March 2011. Kansas saw a 9 percent drop, marketing 395,000 head in March 2012 compared to 435,000 head in March 2011. Texas saw the largest year-to-year decrease in marketings at 470,000, falling 13 percent from 2011’s March numbers.

“Last year marketings fell off sharply from March into April,” according to NARMS cattle on feed commentary. “This year there were a lot more cattle placed against April than against March. It will not be good for cattle feeders to slow down marketings right now, though that is what it seems like has happened over the past few weeks as packers have sharply reduced kill levels.” — Kerry Halladay, WLJ Editor

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